Save Article

Spanish, Portuguese Banks Turn to Repos To Skirt ECB Funding

Spanish and Portuguese banks are cutting their reliance on funding from the European Central Bank, but their alternative sources are as uncertain as the future of those countries.

Spanish banks halved their borrowing from the ECB between July and October, and continued to lower their recourse further in November. In Portugal, banks have also reduced their dependence on the ECB, though to a lesser extent.

At the same time, banks have aggressively increased their use of repurchase agreements—or repos—under which they borrow money from an investor who receives securities as collateral, according to people familiar with the situation.

The banks then have the obligation of buying back those same securities, paying a premium on top of the original price.